Strong consumer demand is helping businesses weather rising costs: CII chief

Rising input costs have put pressure on businesses across sectors, but healthy consumer demand has helped companies maintain profitability, Confederation of Indian Industry (CII) President R Mukundan said in an interview with CNBC-TV18.

Mukundan said several industries have absorbed part of the recent increase in costs, while some of the burden has been passed on to consumers. Despite the pressure, he noted that demand conditions remain supportive.

"The good news is that demand has not tapered. Demand has continued to be healthy," he said.

He pointed to packaging costs as one of the major areas of concern for fast-moving consumer goods companies, adding that some firms have responded with modest price increases.

Mukundan said profitability should be viewed through the combined lens of volumes and margins. While margins may face temporary pressure from higher costs, sustained demand has helped support overall earnings performance.

"If you really look at the overall profitability of the companies, because it is a function of both volume and margin, I think it would probably be playing out in a positive direction," he said.

The CII President described the current cost pressures as temporary and said industry was simultaneously focusing on longer-term competitiveness.

He highlighted a set of reforms proposed by CII to the government, arguing that structural changes aimed at reducing costs across the economy

would help businesses offset future shocks.

"One of the things we've been telling the government is that we should also make sure that the reform process we are recommending actually takes cost out of the system," Mukundan said.

According to him, the industry's response must be two-pronged: managing near-term cost pressures while improving productivity and competitiveness over the medium term.

Mukundan added that Indian companies and banks entered the current period of uncertainty with relatively strong balance sheets, providing a degree of resilience against temporary cost shocks and economic disruptions.